THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES INTERACTIVE GAMBLING BILL 2001

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1 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES INTERACTIVE GAMBLING BILL 2001 REVISED EXPLANATORY MEMORANDUM (Circulated by authority of the Minister for Communications, Information Technology and the Arts, Senator the Honourable Richard Alston) THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE SENATE TO THE BILL AS INTRODUCED

2 1 INTERACTIVE GAMBLING BILL 2001 OUTLINE The Interactive Gambling Bill 2001 (the Bill) provides for restrictions and complaints in relation to interactive gambling services. The framework in the Bill has three main elements. Firstly it creates an offence of providing an interactive gambling service to customers in Australia. Secondly the Bill establishes a complaints scheme which will enable Australians to make complaints about interactive gambling services on the Internet which are available to Australians. Thirdly the Bill prohibits the advertising of interactive gambling services in Australia. The Government is concerned that new interactive technology, such as the Internet and datacasting has the potential to greatly increase the accessibility to gambling and exacerbate problem gambling among Australians. The proposed framework contained in the Bill will limit the development of this newly emerging industry and minimise the scope for problem gambling among Australians. It balances the protection of Australians with a sensible and enforceable regulatory regime. The Government is concerned not to impose unreasonable obligations upon Internet service providers. The proposed regulatory framework in the Bill will give the Australian Broadcasting Authority (ABA) powers to issue notices to Internet service providers aimed at taking reasonable steps to prevent access to prohibited Internet gambling content hosted outside Australia. The main elements of the proposed framework are: an offence provision that makes it an offence for a person to provide interactive gambling services to a customer who is physically present in Australia. The offence provision applies to both Australian-based and overseas interactive gambling service providers; an offence provision that makes it an offence for a person to provide Australian-based interactive gambling services to customers in designated countries; an industry-based system for responding to complaints in relation to interactive gambling services where the relevant content is available for access on the Internet by Australian customers; a complaints mechanism will be established in which a person may complain to the ABA about prohibited Internet gambling content; in relation to Internet content hosted in Australia, the ABA must refer the complaint to an Australian police force if the ABA considers that the complaint should be so referred

3 2 eg. if it appears from the complaint that a person may be committing an offence of providing an interactive gambling service to Australians; in relation to Internet content hosted outside Australia, the ABA must notify the content to the police if it considers that the content should be referred to the police. In addition the ABA will notify the content to Internet service providers so that the providers can deal with the content in accordance with procedures specified in an industry code or standard. In the absence of an industry code or standard the ABA will be given powers to issue a notice to Internet service providers to take reasonable steps to prevent access to the Internet content; Internet service providers will be protected from civil proceedings by customers affected by ABA notices; a graduated scale of sanctions against Internet service providers for breaching ABA notices or the Bill will apply. The Government does not propose to mandate any particular technological solutions to filtering overseas sourced material. Rather, the industry will be asked in the first instance to propose appropriate procedures they would follow in preventing access to prohibited sites. These procedures would take account of technical limitations and cost considerations. However, if the industry is unable or unwilling to develop such procedures itself, or if the procedures are deficient, the ABA will have the ability to make a mandatory industry standard. The Minister will also have the ability to direct the ABA to determine an industry standard if an ABA request to a relevant industry body or association to make an industry code is not complied with. In any event, service providers will only be required to prevent access to material available on their service that has been subject to a complaint and when subsequently notified by the ABA. The Government will continue to work within the Ministerial Council on Gambling for a collaborative national approach on problem gambling. Agreements reached at Council of Australian Governments on 6 November 2000 will result in States and Territories implementing a series of harm minimisation measures immediately. More far-reaching measures and research and public awareness strategies will be developed further under the auspices of the Ministerial Council. Part 7A of the Bill makes it an offence to advertise interactive gambling services in Australia. The prohibition applies to both on-line and offline advertising of interactive gambling in Australia and the external Territories. The prohibition in Part 7A is to apply to any person who publishes or broadcasts an advertisement in Australia for any interactive gambling service (whether or not the interactive gambling service has any Australian customers), subject to certain exceptions set out in Part 7A. The prohibition does not extend to advertisements published in overseas media such as magazines published or distributed overseas or Internet sites that are aimed at non- Australian audiences.

4 3 The prohibition is modelled broadly on the Tobacco Advertising Prohibition Act 1992 (the Tobacco Act). Part 7A includes transitional provisions modelled on the equivalent provisions in the Tobacco Act to accommodate existing arrangements relating to the advertising of interactive gambling services. There are two general offences: an offence of broadcasting an interactive gambling advertisement in Australia; and an offence of publishing an interactive gambling advertisement in Australia. FINANCIAL IMPACT STATEMENT The Bill is not expected to have any financial impact on Commonwealth expenditure or revenue. REGULATION IMPACT STATEMENT INTRODUCTION The Government has a general concern about problem gambling in Australia. The Productivity Commission found in 1999 that 2.1% of the adult Australian population or 290,000 people suffer from problem gambling. 130,000 people experience severe problems. For every problem gambler at least seven other people are adversely affected. There is in addition concern that interactive gambling represents a quantum leap in the accessibility of gambling services, and could exacerbate problem gambling in Australia. Australia already has one of the largest per capita gambling industries in the world. The Productivity Commission found that, on average, adult Australians currently spend at least twice as much on legalised gambling as people in North America and Europe making Australians among the heaviest gamblers in the world. The negative social impacts associated with the gambling industry affect many Australian families and communities. They also affect the Commonwealth Government in terms of welfare and other support functions provided to victims of problem gambling. Australia is also at the forefront of the information economy. It is one of the top four nations in terms of homes with Internet connections and the percentage of the population with Internet access. In 1999, six million Australians had access to the Internet, and of these more than 75% accessed it more than once a week. Between November 1998 and November 1999, the number of households with Internet access increased by over 100%. Over the next twelve months this access is expected to continue to grow rapidly and significantly. The percentage of households with Internet access is expected to grow from

5 4 25% in November 1999 to 35% by November This growth in Internet access corresponds to a growth in the accessibility of gambling services. Australians are also becoming increasingly comfortable with conducting electronic transactions online. Over 800,000 people purchased goods or services over the Internet in the year ending November 1999 an increase of 183% on the previous year s figure of 286,000. Furthermore, the Internet is only one of a growing number of new communications technologies. Within the next year, new interactive broadcasting services and wireless telecommunications services could provide new platforms for gambling. These factors underlie the concern of both the Commonwealth and the community about the potential for interactive gambling to exacerbate the negative social impacts of excessive gambling. New communications technologies have the potential to enable services equivalent to poker machines, casino games, or bookmakers in every Australian home, 24 hours a day. The Productivity Commission has described this as a quantum leap in accessibility. This could contribute to an associated growth in problem gambling. Of particular concern is the presence of gambling in the home. Households with children have been early adopters of new interactive technology such as the Internet. Table 1 demonstrates the high level of Internet uptake in households with children. Table 1: Internet access at home Nov 1998 Nov 1999 Couples with children 27% 39% Single parent families 15% 19% Couples with no children 15% 23% Single person 9% 10% Other 22% 25% Source: The Current State of Play: Australia and the Information Economy, National Office for the Information Economy, 2000 While parents may take reasonable precautions to prevent their children from accessing gambling within the home (via the home computer, for example), it is possible that parental gambling within the home may encourage children to learn and rehearse gambling activities and behaviours. New interactive technology gives content developers the ability to include highly attractive multimedia content in game and site development. Internet gambling sites already offer sophisticated graphics, music, and live broadcasts of events such as horse racing. Improvements in bandwidth, accessibility and processor technology will give developers new opportunities to create new gambling products.

6 5 Young people are early adopters of digital technology and may be particularly attracted to using high-tech gambling products. This may create a new population of problem gamblers. Although technology offers new opportunities for verifying the identity and age of a gambler, the Commonwealth is concerned that savvy users particularly younger, computer-literate users may still find ways around these measures and access gambling from the home. The growth and impact of the Electronic Gaming Machine (EGM) market in Australia is an example of how new gambling products can attract new gambling populations, and create new problem gambling. The Commonwealth is aware of broad community concern about gambling. The Productivity Commission found that while most Australians gamble, around 70% of Australians (including a substantial majority of regular gamblers) consider that gambling does more harm than good to the community. A significant proportion of the submissions made to the Senate Information Technologies Select Committee s inquiry into Internet gambling expressed concern about the potential for interactive gambling to exacerbate problem gambling in Australia. In early 2000, the Government decided to pursue a 12-month moratorium on new interactive gambling services in order to allow the feasibility and consequences of a permanent ban to be studied. After failing to secure the support of all of the States and Territories for a voluntary moratorium, the Government introduced the Interactive Gambling (Moratorium) Bill The moratorium period commenced on 18 May 2000, and covers interactive gaming and interactive wagering after a sporting event has commenced. The Government also established a Ministerial Council to provide leadership on problem gambling. It is made up of State and Territory Ministers and is chaired by the Commonwealth Minister for Family and Community Services. The Ministerial Council met for the first time on 19 April 2000, and agreed to aims and objectives towards a national approach to the problem gambling. It also agreed to exchange information on responsible gambling strategies, and to provide a forum for common issues, with the objective of developing suitable regulatory approaches. In November 2000, the Council of Australian Governments (COAG) considered the issue of problem gambling. It reached agreement on the immediate implementation of a set of harm minimisation measures by State and Territory Governments, mostly focused on electronic gaming machines (EGMs, or pokies ), and agreed that the Ministerial Council would consider a number of more far-reaching measures. This agreement will form the basis for the future work of the Ministerial Council. Interactive gambling was not discussed by COAG. The framework agreed in principle at COAG was progressed at an officials meeting of the Ministerial Council in January The next Ministerial meeting is scheduled for 20 April The National Office for the Information Economy (NOIE) conducted a study into the feasibility and consequences of banning interactive gambling in consultation with the Department of Family and Community Services (FaCS). The report considered the

7 6 technical feasibility of banning interactive gambling on the Internet, and the possible economic and social consequences of a ban, and made the following findings: 1. There are several technical methods that could potentially be used to implement a ban on interactive gambling based on Internet content control. These include packet filtering, content filtering, router filtering and detection-response filtering. However: all of these methods can potentially degrade general Internet performance; none would be 100% effective in preventing Australians access to interactive gambling services; and implementation would take at least six to twelve months and would require consultation with the gambling industry, telecommunications carriers and Internet service providers. Content control options are only relevant to gambling services provided from overseas. Implementing a ban on domestic interactive gambling service providers or on interactive gambling services delivered via digital broadcasting or mobile telephony would require legislative change only. 2. The Commonwealth has clear constitutional and enforcement powers to ban interactive gambling within Australia. Any banning legislation would probably not involve an acquisition of property requiring the provision of just terms compensation. 3. A ban via financial controls is not feasible. 4. Interactive gambling is a rapidly growing e-commerce industry. However, a ban would be consistent with the Commonwealth s e-commerce strategy, which calls for appropriate legal and regulatory measures to protect consumers. 5. Economic modelling commissioned for the study indicates that a ban may have modest or small economic benefits for Australia in terms of restricting access to a harmful activity and possible aggregate benefits for State and Territory taxation revenue. There is also a need for further regulation impact analysis of the costs and benefits of options for implementing any ban. In particular, the modelling did not factor in potential costs to Government and industry of implementing a ban. 6. The growth of interactive gambling has the potential for negative social consequences in Australia because of increased accessibility of gambling services. 7. A ban would be consistent with Australia s current obligations in the context of the General Agreement on Trade in Services, but would need to take into account the Australia-New Zealand Closer Economic Relations Agreement. ISSUE The Government is concerned that new interactive communication services will give interactive gambling service providers (IGSPs) new opportunities to increase the size and accessibility of the gambling industry in Australia. The Productivity Commission has found a

8 7 strong link between the accessibility of gambling services and the prevalence of problem gambling in the community. In its report, Australia s Gambling Industries (1999), it states that there is sufficient evidence from many different sources to suggest a significant connection between greater accessibility and the greater prevalence of problem gambling. The concern is thus that the growth in availability of interactive gambling services to the Australian community will lead to an increase in problem gambling. OBJECTIVES The Government is concerned that the interactive gambling industry has the potential to expand rapidly in Australia, and that any further expansion of interactive gambling could exacerbate problem gambling in Australia. The Government is also mindful of the need not to place undue burdens on Australia s communications industries. It hence seeks a strategy for restricting Australian s access to interactive gambling while balancing the interests of the information economy. OPTIONS Three options can be identified in considering a ban on interactive gambling in Australia: 1. maintaining the status quo by not implementing any sort of ban or restriction; 2. legislating a targeted ban designed to protect Australian consumers while limiting impact on the interactive gambling industry and ISPs; or 3. legislating a comprehensive ban on interactive gambling in Australia that completely eliminates the Australian interactive gambling industry and includes mandatory blocking by ISPs. The first option would allow State and Territory licensing regimes for interactive gambling to operate without Commonwealth intervention. These regimes incorporate harm minimisation measures for interactive gambling, and interact with a developing national approach to interactive gambling regulation. This would also occur in the context of existing initiatives on problem gambling under the strategic framework agreed by COAG and referred for implementation to the Ministerial Council on Gambling. The second option involves the legislation of a ban on the provision of interactive gambling services to persons physically located in Australia by IGSPs with a link to Australia, as well as a complaints-based regime that allows for the filtering of foreign-based IGSPs by Australian Internet users, comparable with existing arrangements for Internet content. The COAG and Ministerial Council initiatives on problem gambling would also apply, as would the harm minimisation measures implemented by States and Territories in the case of

9 8 interactive gambling services provided to overseas customers. This option would not restrict the export of interactive gambling services by Australian IGSPs. The third option would be a comprehensive banning strategy that would seek to prohibit the domestic industry entirely, as well as implement content blocking at the ISP level in order to restrict Australians access to offshore IGSPs. Ministerial Council initiatives for problem gambling would continue to apply, but State and Territory interactive gambling regulation would appear to be superseded under this option. IMPACT ANALYSIS Impact group identification Affected groups would be: IGSPs; interactive gambling consumers and, in particular, problem gamblers; State and Territory Governments; the Commonwealth Government; welfare and problem gambling agencies; communications industries (particularly ISPs); and the Australian economy as a whole. Option 1: Status Quo The Commonwealth could opt to take no action in relation to a ban on interactive gambling, other than existing program initiatives in the context of the Ministerial Council on Gambling. Interactive gambling industry Doing nothing is unlikely to slow the growth of this industry in Australia and the accessibility of gambling services online. The licensing and regulatory regime established by the States and Territories appears to promote the growth of the Australian interactive gambling in a global market. The offshore interactive gambling industry will also continue to have full access to the Australian market. Interactive gambling consumers and problem gamblers If the Commonwealth does not take action to restrict Australians access to interactive gambling services, a range of Australian-based IGSPs and offshore sites will continue to be

10 9 available. Given that Australian States and Territories have already issued a number of interactive gambling licences, it is reasonable to expect that interactive gambling consumers will have access to an increasing choice of domestic providers. Under this option, potential problem gambling arising from interactive gambling will be unchecked. Ministerial Council initiative will provide some protection in terms of problem gambling programs. Because interactive gambling may appeal to new types of gamblers, it is possible that the types of problems encountered by problem gamblers would also be new and different. State and Territory Governments Under the status quo option, State and Territory Governments will be able to continue to license new interactive gambling service providers. This will enable the licensing authorities to continue to collect fees and will provide ongoing opportunities to generate revenue. However, an economic study commissioned by NOIE points out that interactive gambling is subject to concessional tax regimes and tax competition between States and Territories. State and Territory revenues may thus be limited by the growth of the interactive gambling industry in relation to other entertainment or comparable industries taxed at normal rates. Commonwealth Government There is no direct financial impact on the Commonwealth under the status quo. The Commonwealth has agreed in principle to jointly fund initiatives agreed at the COAG meeting of November 2000, but these relate to all gambling rather than just interactive gambling. An indirect impact may stem from a greater demand for Commonwealth social services resulting from problem gambling associate with interactive gambling services that would otherwise have been restricted. Welfare and problem gambling agencies There is a reasonable expectation that problem gambling and the demand for problem gambling support services in Australia will continue to grow if the Commonwealth does nothing to restrict Australian s access to interactive gambling services. Moreover, because interactive gambling may attract new players, there is a chance that problem gambling support agencies may need to adapt to deal with growing numbers of problem interactive gamblers. Communications industries

11 10 Under the status quo, no obligations are imposed on ISPs or other sectors of the communications industry by the Commonwealth to take any measures to restrict access to interactive gambling services. The Australian economy as a whole Under the status quo option, the Australian economy as a whole would not benefit from any measures that might limit problem gamblers requirements for social services. The Australian interactive gambling industry would remain a moderate earner of export revenue, as well as a moderate source of revenue for States and Territories. However, economic modelling suggests that this option may not maximise such benefits. Option 2: A Targeted Ban The Commonwealth could ban the provision of interactive gambling services by Australian operators to users in Australia. It could also give Australian users the capacity to filter out these services from offshore providers.

12 11 Interactive gambling industry A distinction needs to be made between gaming, wagering and lotteries as different types of gambling in assessing the impact of the proposed legislation on the interactive gambling industry. Imposing such a ban is likely to have a moderate effect on the Australian-based interactive gaming industry and its employees. This is because the interactive gaming industry in Australia is primarily focused on offshore markets. For example, only about 5% of Lasseters Online players are Australian, and only a subset of these play for money. Australian users make up only a tiny proportion of interactive gaming providers clientele, and this pattern is likely to be followed by new entrants into the market. This option would hence not significantly limit the capacity of Australian interactive gaming providers from competing in a global market. Interactive wagering and lotteries are different. The market for some of these services is primarily domestic. The restriction of interactive wagering and lottery services may therefore have significant negative commercial consequences for segments of the industry that are focused on a domestic market. The legislation would not limit or restrict in any way the capacity of State and Territory Governments to renew existing interactive gambling licences or approvals, or to issue further licences or approvals. The primary regulatory hurdle for new Australian entrants into the international interactive gambling market is obtaining authority from the relevant State or Territory Government. State and Territory Governments Research commissioned by NOIE suggests that a ban on the provision of interactive gambling services by Australian operators to Australians may have a moderately beneficial aggregate impact on State and Territory revenues. This is because the interactive gambling industry is currently subject to taxation incentives and taxation competition between States and Territories. The consultant s proposition is that a restriction on Australians access to this industry would result in increased patronage of entertainment activities that are taxed at a higher rate than interactive gambling, with a corresponding increase in State and Territory revenue. Commonwealth Government The cost of the Government s monitoring role under the legislation has been estimated at around $1.5m in for start up, and then $0.75m for each of the forward years. These costs should be absorbed.

13 12 There may be a reduction in demand for Commonwealth social services that would have been required as a consequence of problem gambling associated with prohibited interactive gambling services. Interactive gambling consumers and problem gamblers A restriction on the range of interactive gambling services available to consumers would reduce consumer choice. However, consumers, and in particular problem gamblers, would have some protection from interactive gambling services, which, in the Government s view, have the potential to exacerbate problem gambling. Welfare and problem gambling agencies Pressure on welfare and problem gambling agencies would potentially be reduced by a restriction on Australians access to interactive gambling services. Communications industries Under a targeted ban, the ISP industry would have the option of contributing to the development of a code by a representative industry body that would provide for approved content filters to be made available to Australian Internet users. In this regard, the legislation is modelled on the online content scheme implemented in 1999 by Schedule 5 of the Broadcasting Services Act Under Schedule 5, the Internet Industry Association (IIA) registered a code with the Australian Broadcasting Authority (ABA). The code provided for the industry to respond to community complaints against content that had been upheld by the ABA by notifying the manufacturers of approved filters about the offending sites. It also provided for ISPs to furnish their users with information about the online content scheme and access to approved filtering software. In practice, the obligations of an ISP are discharged by providing hyperlinks to information on the ABA website and the websites of approved filter providers. This regulatory impact could be described as minimal. The fact that the current legislation is modelled on the online content scheme also means that setup and compliance costs for the industry would be marginal in nature. There would also be no impact on general Internet performance. The installation of filtering software on end users computers is entirely voluntary on the part of the user. Even where a user chooses to install the software, the effect would be so small as to be difficult to measure, and would only affect that user s computer, and not general Internet performance. The speed of a user s computer processor and Internet connection are far more significant factors in determining the performance of the Internet from the perspective of that user. The installation of filtering technology at any level of the Internet hierarchy would not be mandated under this option. The mandating of such technologies would have a deleterious

14 13 effect on general Internet performance, either by slowing down data transfer speeds, or by unintentionally blocking access to legitimate online services. There is also evidence that the interactive gambling industry contributes to the development of Australia s information industries. Spin-off benefits in the form of expertise and infrastructure would continue to accrue in some degree under this option. The Australian economy as a whole Economic modelling suggests that there is likely to be no benefit to national economic welfare from including exports in a ban on interactive gambling. This is because exports of interactive gambling do not impose any domestic social costs. Hence, under the criterion of maximising national economic welfare, if interactive gambling is to be banned, the ban should cover interactive gambling supplied to people located in Australia, but not people outside Australia. This modelling also suggests that the economic benefit derived from a ban does not differ dramatically between a partial ban and a comprehensive ban. Option 3: A Comprehensive Ban Under the third option, a banning strategy would be comprehensively applied to both domestic and foreign IGSPs. This would involve complete prohibition of Australian IGSPs, regardless of whether they provide gambling services to Australians or offshore residents, as well as an aggressive strategy to prevent Australians access to offshore interactive gambling services via blocking measures at the ISP level.

15 14 Interactive gambling industry The domestic interactive gambling industry would be eliminated by this option. A substantial reduction in employment in the gambling industry would result. State and Territory Governments As is the case with a targeted ban, a comprehensive ban may have a moderately beneficial impact on State and Territory revenues, according to economic research commissioned for the study into the feasibility and consequences of banning interactive gambling. This is because a restriction on the interactive gambling industry would be likely to result in increased patronage of entertainment activities that are taxed at a higher rate than interactive gambling. Commonwealth Government A comprehensive ban would require considerably greater resources than those estimated in relation to option 2 for both administration of a content regulation scheme and police enforcement of offences. There is no precise estimate. There may be a reduction in demand for Commonwealth social services that would have been required as a consequence of problem gambling associated with prohibited interactive gambling services. Interactive gambling consumers and problem gamblers Consumers choice would be restricted, with a corresponding diminution in the value of the interactive gambling industry as a whole. However, there would also be protection from the possible harmful social effects of interactive gambling. Welfare and problem gambling services Welfare and problem gambling support services would benefit by not having to provide increasing levels of service to those impacted by problem gambling related to interactive gambling. Communications industries A comprehensive ban would involve the mandatory installation of content blocking technologies by ISPs. There are several technical methods that could potentially be used, but all can degrade general Internet performance, and none would be 100% effective in preventing Australians access to interactive gambling services. Such a strategy would

16 15 involve significant industry-wide costs, ranging from $200,000 to $6 million for implementation, and $200,000 to $2.6 million annually (rising uncapped) for maintenance. Inferior Internet performance would have flow-on effects for the entire information economy in Australia. The Australian economy as a whole Like a targeted ban, economic modelling suggests that a comprehensive ban could have moderate benefits for the Australian economy as a whole. However, these benefits are somewhat limited compared to a targeted ban because of the limitation on consumer choice and the corresponding dip in the value of the interactive gambling industry. The decrease in export revenue resulting from the restriction on exports of interactive gambling services would also deprive the Australian economy of some benefit. CONCLUSION AND RECOMMENDED OPTION The recommended option: focuses a ban to the provision of service by Australian operators to Australians; does not restrict the capacity of Australian IGSPs to compete in the international market; may have moderate benefits for State and Territory revenues and the economy as a whole, according to one economic model; and would have a minimal impact on the Internet service industry. The option would be complemented by initiatives underway in the context of the Ministerial Council on Gambling to deal with problem gambling. This is preferable to the maintenance of the status quo, which may exacerbate problem gambling through an increase in access to gambling services. It is also preferable to a comprehensive ban, which would impose unreasonable obligations on ISPs and would completely eliminate the interactive gambling industry in Australia. OTHER ISSUES Restriction on competition The recommended option does not restrict the potential of the Australian interactive gambling industry to compete in an international market. It restricts the access of offshore providers to the Australian market, but only to the extent that Australian users choose to take advantage of the complaints-based content regime to filter these services from their systems.

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18 17 Effects on small business IGSPs that are small businesses may have to modify their services to comply with the recommended strategy. Specifically, such small businesses may have to take steps to restrict Australians access to interactive gambling services. However, small IGSPs would continue to have access to the international market. ISPs that are small businesses may have to contribute to the development of an industry code to provide for user-level filtering of offshore services identified under the complaints-based regime. They would also need to ensure that such filtering software is made available to Australian users. These compliance costs would be minimal since this is largely commensurate with provisions already made under the Broadcasting Services Act 1992 for Internet content regulation. Effects on regional Australian jobs The recommended option would have some impact on employment in regional Australia, to the extent that elements of the interactive gambling industry most severely impacted by the restrictions may be located in regional Australia. These include interactive wagering and lottery providers. Jobs in the interactive gaming and Internet service industries in regional Australia will experience a more moderate impact. Trade Impact Analysis Given the global market for interactive gambling services is largely untapped, the Australian interactive gambling industry has the potential to generate export revenue. The Australian industry is relatively new and small. As at early June 2000 there were approximately 15 providers operating. States and Territories had issued 25 interactive gambling licences. Evidence provided to the Senate Select Committee on Information Technologies 1999 inquiry into Internet gambling indicates that, although new, a number of providers have had rapid growth and are generating export revenue. The recommended option will not prevent existing and prospective IGSPs from competing internationally for business. CONSULTATION In the course of completing the study into the feasibility and consequences of banning interactive gambling, the Government undertook wide industry and community consultation, including: a round of written public submissions in July and August 2000, during which 59 submissions were received;

19 18 an interactive gambling forum hosted by NOIE in Melbourne in October 2000, attended by representatives from the interactive gambling industry, community groups and academia; and a telephone survey of community attitudes commissioned by FaCS. The Government also accepted numerous written and oral representations from industry and community bodies on the topic of a ban on interactive gambling during the moratorium period, and commissioned expert studies on the economic and technical impacts of a possible ban. The recommended option has been developed to respond to strong community concern about the potential of interactive gambling to exacerbate problem gambling, in a way that balances the concerns of the interactive gambling industry and communications industries. Views expressed in consultation have been incorporated into the recommended option in the following ways: 1. It responds to community concern about interactive gambling by restricting Australian s access to these services. Submissions from individuals and community groups, as well as the survey of community attitudes commissioned by FaCS, indicated a high level of community support for strong restrictions on access to such services. The Interchurch Gambling Task Force, the Salvation Army, the Wesley Community Legal Service, as well as two-thirds of the respondents to the community survey, are among those who voiced concern in this respect. 2. It avoids mandatory online content blocking at the ISP level. The submission from the ISP industry peak body, the Internet Industry Association, as well as the technical study commissioned by NOIE, indicated that mandatory filtering could have a negative impact on Internet performance and would be easily circumvented by determined users. Implementation and review A phase-in period between passage of the legislation and commencement will give IGSPs time to upgrade their systems to be compliant with the requirement that interactive gambling services should not be provided to Australians. ISPs will have additional time to prepare an industry code to provide for filtering options for Australian users. The scheme could be reviewed six months subsequent to the completion of the implementation period, in the same way that the online content scheme has been reviewed.

20 19 ABBREVIATIONS The following abbreviations are used in this explanatory memorandum: ABA: Australian Broadcasting Authority Bill: Interactive Gambling Bill 2001 BSA: Broadcasting Services Act 1992 Radiocommunications Act: Radiocommunications Act 1992 Telecommunications Act: Telecommunications Act 1997

21 20 NOTES ON CLAUSES Part 1 Introduction Clause 1 Short title Clause 1 provides that the Bill, when enacted, may be cited as the Interactive Gambling Act Clause 2 Commencement Clause 2 provides for a staged commencement of the Bill. Part 2 of the Bill (which relates to the offence of providing an interactive gambling service to customers in Australia) will commence on the 28 th day after the day on which the Bill receives the Royal Assent. This will provide industry with additional lead-time to put appropriate arrangements in place to avoid contravening the Bill. Part 2A of the Bill (which relates to the offence of providing Australian-based interactive gambling services to customers in designated countries) will also commence on the 28 th day after the day on which the Bill receives the Royal Assent. Part 7A of the Bill (which relates to the offence of advertising interactive gambling services in Australia) will also commence on the 28 th day after the day on which the Bill receives the Royal Assent. This will provide industry with additional lead-time to put appropriate arrangements in place to avoid contravening the advertising prohibition. Part 3, sections 42, 43, 48, 49 and Part 5 of the Bill will commence on a date to be proclaimed, or six months after the day on which the Bill receives the Royal Assent, whichever is the earlier. These provisions relate to the complaints system for prohibited Internet gambling content, the compliance with industry codes and standards and on-line provider rules. This later commencement date will enable the industry and the ABA to develop industry codes or standards and ensure that Internet service providers are not subject to offences relating to non-compliance with codes and standards prior to such codes or standards being developed. The later commencement date takes into account the timeframes required to develop codes and standards due to minimum periods for public consultation on draft codes and standards provided for in the Bill. The remaining provisions within the Bill commence on the day on which it receives the Royal Assent. This includes Part 4 (except sections 42, 43, 48 and 49), which relates to industry codes and industry standards. This immediate commencement will enable industry to start developing a code as soon as the Bill receives the Royal Assent.

22 21 Clause 3 Simplified outline Clause 3 sets out a simplified outline of the Bill to assist readers. Clause 4 Definitions Clause 4 sets out the key definitions used in the Bill. These definitions are discussed below. ABA The term ABA is defined to mean the Australian Broadcasting Authority. Under the Bill, complaints about prohibited Internet gambling content will be able to be made to the ABA. The Bill enables the ABA to investigate such complaints. If the prohibited Internet gambling content is hosted in Australia and the ABA considers that the complaint should be referred to an Australian police force (for example because it may breach the offence in clause 15 of the Bill), then the ABA must refer it to the police. If the ABA is satisfied that Internet content hosted outside Australia is prohibited Internet gambling content, the ABA will be able to notify the content to a law enforcement agency or take other appropriate action under clause 24 of the Bill. Access The term access is defined to have the same meaning as in Schedule 5 to the BSA (which regulates the publication of illegal and offensive material on the Internet). This term is used in the definitions of prohibited Internet gambling content and Internet carriage service. The definition of the term access in clause 4 is included to avoid doubt and to avoid the term being given an unduly narrow meaning. Access will include access that is subject to a pre-condition (such as the use of a password), access by way of push technology (where a customer requests a content provider to provide him or her with online material on a regular basis, for example, subscription to an Internet channel ) and access by way of a standing request to an Internet content host to send material stored on the Internet. Australia The term Australia, when used in a geographical sense, is defined to include the external Territories. These Territories include Norfolk Island, Cocos (Keeling) Islands and Christmas Island. Examples of the use of the term Australia are in clauses 8, 16, 61DA and 61EA of the Bill.

23 22 Australian-customer link The term Australian-customer link is defined to have the meaning given by proposed section 8. For the purposes of the Bill, a gambling service (discussed below) will have an Australian-customer link if, and only if, any or all of the customers of the service are physically present in Australia. An Australian-customer link is one of the key elements of the definition of a prohibited Internet gambling service in clause 6 of the Bill. It is also used in the offence provision in clause 15 of the Bill. Australian police force The term Australian police force is defined to mean the Australian Federal Police, or the police force of a State or Territory. The ABA may refer a complaint to a member of the Australian police force if the ABA considers that the complaint should be referred to the police. In addition ABA may notify the police of Internet content hosted outside Australia if the ABA is satisfied that it is prohibited Internet gambling content under proposed section 24. Bet The term bet is defined in clause 4 to include a wager. A bet in a pool-betting scheme such as the TAB or Tattslotto is a bet for the purposes of the Bill. Broadcasting service This term is defined to mean a broadcasting service (as defined by the Broadcasting Services Act 1992 (BSA)) provided in Australia. The term is used in paragraph 5(1)(b) of the definition of an interactive gambling service. Section 6 of the BSA defines broadcasting service broadly to mean a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radiofrequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means, but does not include: (a) (b) (c) a service (including a teletext service) that provides no more than data, and no more than text (with or without associated still images); or a service that makes programs available on demand on a point-to-point basis, including a dial-up service; or a service, or a class of services, that the Minister determines, by notice in the Commonwealth Gazette, not to fall within this definition.

24 23 The explanatory memorandum to the BSA states that the exclusion in paragraph (b) of the definition of broadcasting service encompasses those services which allow a person to receive or access a program at a time determined by the person making a request. That is, where the scheduling of the program is determined by the service provider, the service is not a point-to-point service. Program, in relation to a broadcasting service, is defined to mean: (a) (b) matter the primary purpose of which is to entertain, to educate or to inform an audience; or advertising or sponsorship matter, whether or not of a commercial kind. Business The term business is defined in clause 4 to include a venture or concern in trade or commerce, whether or not conducted on a regular, repetitive or continuous basis. This definition has been included to make it clear that a person would be providing a service in the course of carrying on a business for the purposes of the Bill even if the person conducted a one-off or irregular commercial activity. The definition also provides that to avoid doubt, the fact that a club or association provides services to its members does not prevent these services from being services provided in the course of carrying on a business. This is included to remove any possible doubt that if a club or association were to provide an interactive gambling service to its members, it could be considered to be carrying on a business for the purposes of this Bill. The term business is used in clauses 6 and 7 of the Bill and in paragraph 5(1)(a) of the definition of an interactive gambling service. Paragraph 5(1)(a) provides that one of the conditions that needs to be satisfied before a gambling service (as defined in clause 4) can be an interactive gambling service for the purposes of the Bill is that the service is provided in the course of carrying on a business. The settled legal meaning of carrying on a business is to conduct some form of commercial enterprise, systematically or regularly, with a view to a profit: Hyde v Sullivan [1956] SR (NSW) 113. The definition of business in clause 4 varies the ordinary meaning of business so that it is clear that, for the purposes of the Bill, a one-off or irregular gambling service that satisfies the definition of a gambling service and is provided using a communications service specified in paragraph 5(1)(b) would be an interactive gambling service unless the service is an excluded service under subclause 5(3). A commercial enterprise that provides a service with a view to a profit is clearly providing a service in the course of carrying on a business. However an in-house electronic raffle run by a staff member of a commercial enterprise to raise money for a charity would not be a service provided in the course of carrying on a business, even though it takes place within a commercial enterprise. The motive in this example is not for profit.

25 24 In contrast, a not-for-profit body, such as a religious, community or sporting association would generally not be regarded to be providing a service in the course of carrying on a business because, in carrying on its activities, such an association does not exist for the purpose of making a profit. However, the relevant consideration for a Court in assessing whether a service is provided in the course of carrying on a business would be the nature of the particular activity and the profit motive. For example a not-for-profit amateur sporting association that runs an electronic lottery once or twice a year as a fund-raising activity would not generally be regarded as providing that service in the course of carrying on a business due to the absence of the profit motive. Business day The term business day is defined in clause 4 to mean a day that is not a Saturday, a Sunday or a public holiday in the place concerned. This term is used in clause 28 of the Bill, which relates to compliance with access-prevention notices. Chapter 8 agreement The term Chapter 8 agreement is defined in clause 4 to have the same meaning as in the Corporations Law. This term is used in clause 9 of the Bill, which relates to contracts that are exempt under the Corporations Law. Under clause 5 and clause 6 of the Bill services which relate to contracts that under the Corporations Law are exempt from a law relating to gaming or wagering are specifically excluded from the meaning of an interactive gambling service and a prohibited Internet gambling service for the purposes of the Bill. Clause 9 of the Bill sets out the meaning of contracts that under the Corporations Law are exempt from a law relating to gaming and wagering for the purposes of the Bill. It includes Chapter 8 agreements covered by subsection 1141(2) of the Corporations Law ie deliverable bond contracts and futures options over such contracts (see regulations and of the Corporations Regulations). Civil proceeding The term civil proceeding is defined in clause 4 to include a civil action. This term is used in Part 6 of the Bill, which provides protection from civil proceedings for Internet service providers in specified circumstances. Content service The term content service is defined in clause 4 to mean a content service (as defined by the Telecommunications Act 1997 (the Telecommunications Act)) provided using a listed carriage service (discussed below). This term is used in clause 5 of the Bill. Section 15 of the Telecommunications Act defines a content service as: a broadcasting service (as defined in the BSA, see above);